Silver's Dual Assault: UBS Slashes Deficit Forecast as Solar Industry Goes Copper
Published on 05/19/2026 at 04:32 | Redaktion boerse-global.de
The narrative that has underpinned silver’s rally for months is fracturing on two fronts simultaneously. A brutal session on Friday saw the metal shed more than 9% to close at $77.55 an ounce, and the selling has continued into a third consecutive session, with the spot price dipping below $76. The trigger: a dramatic revision from UBS that cut the estimated global supply deficit for 2026 from 300 million ounces to just 70 million ounces, wiping out what many bulls considered the most compelling argument for further gains.
The Swiss bank cited weakening demand across the board. High prices are squeezing off take in the photovoltaic industry, along with jewelry and silverware, while ETF holdings have contracted by nearly 70 million ounces. UBS also slashed its investment-demand forecast accordingly. The move landed like a bucket of cold water on a market that had been pricing in chronic scarcity as a given.
If the supply story has been dented, the demand growth engine is also showing serious cracks. The solar sector, long the most dynamic source of silver consumption, is now actively substituting away from the metal. Industry demand from photovoltaics fell 6% in 2025 to 186.6 million ounces and is expected to drop further to around 151 million ounces this year. Chinese manufacturers are leading the charge: Longi Green Energy Technology plans to commercialize back-contact cells using copper instead of silver in the second quarter of 2026, Jinko Solar is scaling up copper-based panel production, and Shanghai Aiko Solar has already launched silver-free solar cells. Thrifting is no longer a slow trend—it is an active threat to future demand.
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Macroeconomic headwinds are compounding the sector-specific gloom. A strong U.S. dollar and rising bond yields are weighing on precious metals across the board, while inflation expectations have been reignited by tensions in the Strait of Hormuz, through which roughly 20% of global oil flows. U.S. producer, import, and export prices all accelerated in April at the fastest clip in years. The Federal Reserve’s next policy signal comes on May 20 with the release of its meeting minutes, but markets are already pricing out any rate cut for the rest of the year, with some traders betting on a hike by December. That environment is toxic for an asset that pays no yield.
Yet not everyone is throwing in the towel. Citigroup is sticking to its $110 target for the second half of 2026, and Bank of America expects an average price of around $86 this year. Their optimism finds a measure of support in Asia: China imported roughly 836 tonnes of silver in March 2026 alone, one of the highest monthly totals on record, signaling that physical demand remains robust in the region.
Supply deficits, meanwhile, are not entirely a dead letter. The market is still on track for its sixth consecutive annual shortfall, with one widely cited estimate putting the gap at around 46 million ounces. But supply is sluggish to respond—around 70% of silver comes as a byproduct of base-metal mining—so that deficit acts more as a floor than a catalyst. The LBMA’s 2026 survey reflects the deep uncertainty, with the average forecast at $79.57 per ounce and a range spanning $42 to $165.
For now, the key variables are no longer the classic precious-metal themes of inflation hedging or safe-haven flows. The next major moves will be decided by solar manufacturers’ procurement lists and the Federal Reserve’s interest-rate path. Until both turn more favorable, the deficit alone looks like a thin lifeline.
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